Two Heritage Foundation scholars took Federal Reserve Chair Janet Yellen to task on income inequality Tuesday.
Stephen Moore and Joel Griffin disputed Yellen’s recent claim that income inequality has been growing steadily since the 1980s.
Yellen maintained in a speech earlier this month that, “The distribution of income and wealth in the United States has been widening more or less steadily for several decades, to a greater extent than in most advanced countries,” adding, “The extent of and continuing increase in inequality in the United States greatly concerns me.”
Moore and Griffith counter that, “actually, that’s a factually dubious claim given that the 1980’s and 1990’s saw wide gains for the middle class and even those at the bottom of the income pyramid.” (RELATED: Raising the Minimum Wage Won’t Solve the Problem of Income Inequality)
“From 1982-1997,” they point out, “those who started out as poor actually saw faster income gains than those who started out as rich,” according to a Treasury Department study, and “middle income families saw a more than 30 percent inflation-adjusted rise in income in those years.”
In reality, they say, “Obamanomics has made inequality much worse,” with almost all income gains going to the top five percent. “The income gap is widening today because this has been the slowest recovery from a recession since the 1930’s,” they assert. (RELATED: Labor Union Says Obamacare is Widening Income Inequality)
Citing research from the Joint Economic Committee of Congress, Moore and Griffith note that, adjusted for inflation, “our national output is about $1.6 trillion behind” the average post-1960 recovery, and $2.2 trillion behind the Reagan recovery of the early 1980’s.
Carl Tannenbaum, chief economist at Northern Trust, acknowledged on Friday that, “The subpar recovery after the Great Recession resulted in weak and unbalanced gains in income,” but argued that inequality had been growing even before then.
“According to the Fed’s Survey of Consumer Finances,” Tannenbaum said, “during 1989-2013, the average income of the top 5% of households rose 38%, while the average income of the remaining 95% grew only 5%.”(RELATED: Study: More Economic Freedom Equals Less Pollution and Income Inequality)
This is reflected by the fact that “sales at high-end stores increased around 75 percent during 2006-2013 compared with growth of a little more than 25 percent at lower- and middle-income stores,” which he claims is consistent with what one would expect, given that rising inequality “should benefit outlays on luxuries, which are typically concentrated in the upper part of the income distribution.”
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